How to Purchase Stocks

Buying stocks can help you build a nest egg, and is a smart way to invest money. Here’s a look at strategies for how to purchase stocks.

Where Can I Purchase Stocks?

There are two ways to buy stocks — you can sit down with a broker or buy stocks online. Either way, you start by making a cash deposit into an account. Top firms like Charles Schwab are a good place to start if you want to meet with a broker face-to-face (and have the option to manage stocks online). Or, you can go to a site like Ameritrade if you want to know where to purchase stocks, and prefer an online brokerage, states the “Wall Street Journal.”

Market vs. Limited Purchase

Once your account is set up, you can start buying stocks, either through your broker or by trading on your own, electronically. When buying stocks, you can make a “market” purchase, which is buying at the current price, or a “limited” purchase, which is waiting to buy the stock when the price meets whatever limit you’ve decided on, according to the “Wall Street Journal.” You may not want to take investment advice from a professional, but instead develop your own strategy for determining which companies you should buy stock in, whether you purchase one share of stock or 100 shares, states Dummies.com.

Deciding Where to Invest

Evaluating stocks is important if you want your investment portfolio to grow. That means you have to take the time to research a company before buying its stock, suggests Dummies.com. One thing to look for when deciding on the best stock to purchase now is a company’s income statement and balance sheet. Look for companies that have higher sales, higher equity and less or the same debt than the previous year, as well as 10 percent higher earnings, advises Dummies.com. Even if it’s a well-known company (for example, if you’re ready to make a Tesla stock purchase), it’s still important to do your homework regarding the company’s performance.

Direct-Purchase Stocks

Some stocks are available for purchase directly from the company, which is a way to avoid paying broker fees, advises the “Wall Street Journal.” You can go online to easily find a list of direct stock purchase companies.

Understanding the Numbers

Learn what the numbers mean, and what to look for when buying stocks. For example, price-to-earnings ratio, or P/E, shouldn’t exceed 20 for large-cap stocks, and should be less than 40 for other types of stock, advises Dummies.com. The price-to-sales ratio, or PSR, should be close to one, while the return on equity (ROE) should be increasing by 10 percent or more annually. The debt-to-asset ratio shouldn’t exceed half of the company’s assets, states Dummies.com.

ADVERTISEMENT

MORE FROM ASKMONEY.COM